Yafai v Muthana [2012] EWCA Civ 289

Case No A3/2011/2814/CHANF[2012] EWCA Civ 289
IN THE COURT OF APPEAL (CIVIL DIVISION)
Venue ON APPEAL FROM Chancery Division, Leeds District Registry
HHJ Langan QC
8LS30007
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 16/03/2012
Before
THE CHANCELLOR OF THE HIGH COURTLORD JUSTICE PATTENLORD JUSTICE PITCHFORD
Between
MAGEED AHMED KASSEM MOHAMMED YAFAIDefendant / AppellantMOHAMMED ABDULLA MUTHANAClaimant / Respondent
(Transcript of the Handed Down Judgment ofWordWave International LimitedA Merrill Communications Company165 Fleet Street, London EC4A 2DYTel No: 020 7404 1400, Fax No: 020 7404 1424Official Shorthand Writers to the Court)
Paul Chaisty QC and Adrian Jackson (instructed by Wake Smith LLP) for AppellantDerek Sweeting QC and Hugh Preston (instructed by SHK Solicitors) for RespondentHearing Hearing dates: 6 March 2012
JudgmentThe Chancellor:Introduction
[1]The claimant (“Mr Muthana”) and the defendant (“Mr Yafai”) are Yemenis from the same tribe. Mr Muthana, who is now some 81 years old, lived and worked in Sheffield until he moved to the US in 1964. Mr Yafai is now about 41. He was born in Sheffield and has lived and worked there since 1988. Mr Muthana has known him since Mr Yafai was a boy. Their relationship was like that of uncle/nephew. On the occasions, since the mid 1990s, when Mr Muthana returned to Sheffield he would stay with Mr Yafai and his wife Mirium. Initially Mr Yafai and his wife ran a convenience store and two investment properties. In 1998 they gave up the convenience store and embarked as partners in a car dealership business called West Bar Motor Company. The following year the opportunity arose for Mr and Mrs Yafai to expand their business by the acquisition for £190,000 of a further business involved in vehicle sales, repairs and an MoT testing station called the Grenoside Service Station, Penistone Road, Grenoside, Sheffield.[2]On 16th September 1999 Mr Muthana arrived in England and went to stay with Mr and Mrs Yafai in Sheffield. There is no doubt that over the ensuing days and weeks Mr Muthana and Mr Yafai discussed the acquisition of the Grenoside Service Station. On 29th October 1999 Mr Muthana arranged for £151,000 to be transferred from his account in Chicago to the account of Mr and Mrs Yafai in relation to West Bar Motor Company; on 4th November 1999 they arranged for its further transfer to the credit of their account in the name of Grenoside.[3]On 8th November 1999 there was concluded and completed an agreement (“the Sale Contract”) made between D.Nicholson and J.A.Stevenson(1) and Mr Yafai(2) for the sale of the Grenoside Service Station by the former to the latter for £190,000 apportioned as to £175,000 to freehold property known as Eden Park (“Eden Park”) on which the service station was carried on, £10,000 for goodwill and £5,000 for certain fixed assets. Eden Park and other property owned by Mr Yafai were charged to Natwest as security for a loan of £126,000 repayable over five years. In addition Mr Yafai found £65,000 from his own resources and had stock associated with the West Bar Motor Company worth some £26,000.[4]Contemporaneously with the Sale Contract, Mr Muthana and Mr Yafai entered into a Partnership Deed, to which I shall refer in detail later, constituting themselves partners from the 8th November 1999 until terminated as therein provided in the business of the sales, service, repair and MoT Testing of Motor Vehicles carried on by Mr Yafai under the style or title of Grenoside Service Station. The principal question for our determination is whether Eden Park was an asset of the partnership or the property of Mr Yafai. Before I turn to that issue it is necessary to recount some of the later history.[5]On 1st April 2002 Mr Yafai caused the incorporation of two companies, namely, the Car Megastore Ltd (“CMS”) and Properties to Let Ltd (“PTL”). One share only was issued in each company. In the case of CMS the share was issued to Mr Yafai alone and later transferred by him into the names of his wife and himself; in the case of PTL the share was issued to Mr Yafai and his wife jointly. On 1st April 2003 the Grenoside business, excluding Eden Park, was sold to CMS for £140,339. On 3rd July 2003 Eden Park was sold by Mr Yafai to PTL for £250,000. Of that sum £79,612 was borrowed by PTL from Yorkshire Bank on the security of Eden Park and the balance credited to Mr Yafai in the books of PTL. Eden Park was then let by PTL to CMS so that the Grenoside Service Station continued to be carried on at Eden Park until the business was closed down on 31st July 2008. CMS is insolvent.[6]These proceedings were commenced as long ago as 12th July 2007 when Mr Muthana issued a Part 8 claim form seeking declarations as to the existence of the partnership and its dissolution and such further relief, including an inquiry as to the assets and liabilities of the partnership, as might be necessary to wind up its affairs. Initially Mr Yafai disputed the existence of the partnership. That contention was abandoned and the appropriate declarations were made on 2nd May 2008 and 10th February 2009. Then there arose a number of other issues including whether the dispute had been compromised by certain payments made by Mr Yafai to Mr Muthana in 2004 and whether the defences of laches and acquiescence were open to Mr Yafai. Those issues were tried by HH Judge Langan QC as preliminary issues and concluded against Mr Yafai by a judgment dated 10th February 2009. On 2nd October 2009 the parties agreed that the partnership had been dissolved with effect from 17th June 2009 and that Mr Muthana was entitled to the accounts and enquiries necessary to enable the partnership to be wound up by the court.[7]On 7th October 2009 HH Judge Langan QC ordered statements of case to be served by each party as to who owed what on the final winding up of the affairs of the partnership. The hearing of the issues thereby disclosed took place before HH Judge Langan QC on 8th to 11th March, 9th, 10th and 13th May 2011. He handed down his judgment on 10th June 2011 and the order to give effect to his conclusions was drawn up on 13th October 2011. He made various declarations relevant to this appeal from that order. They were to the effect that:(1) Mr Yafai, as beneficial owner of 50% of the single issued share in both CMS and PTL holds and has since 1st April 2003 held that beneficial interest in trust for Mr Muthana absolutely;(2) Eden Park was at the time of its sale to PTL in 2003 held by Mr Yafai as an asset of the partnership between him and Mr Muthana. The judge gave permission to appeal against all such declarations.[8]We indicated to counsel that we wished to hear argument on the declaration in relation to Eden Park summarised in paragraph 7(2) above first. Having heard full argument on that issue we informed counsel that we had concluded, for reasons to be given in writing later, that the judge was wrong to have made that declaration. We granted a short adjournment to enable the parties to consider the further conduct of the appeal. In the result all the remaining issues were compromised on terms to be embodied in a minute of order. What follows are my reasons for concluding that Eden Park was not at the time of its sale to PTL (or at any earlier time) held by Mr Yafai as an asset of the partnership.

The relevant documents

[9]The first relevant document is the Sale Contract. As I have already indicated the vendors were David Nicholson and James Stevenson. The purchaser was Mr Yafai alone. Clause 1 contains various definitions. Those now relevant are as follows:
“1.1 In this Agreement the following words and expressions shall have the following meanings unless they are inconsistent with the context:- “Assets” means the property, assets and rights of the Business to be purchased by the Purchaser as described in Clause 2.1. “Business” means the business of vehicle repairs, sales and an MOT testing garage business carried on by the Vendor at the Property under the name of Grenoside Service Station. “Business Name” means Grenoside Service Station. “Property” means land and buildings on the north east side of Penistone Road, Grenoside, Sheffield registered at HM Land Registry with Title Absolute under Title Numbers SYK111326 and SYK70082. “Fixed Assets” means the fixtures, fittings and equipment used in the Business particulars of which are set out in the First Schedule hereto. “the Excluded Assets” means all cash in hand or at the Bank of the Vendor, the Book Debts and the Liabilities.”
It is common ground that the registered title referred to in the description of “Property” is that of Eden Park. “Assets” means the property, assets and rights of the Business to be purchased by the Purchaser as described in Clause 2.1. “Business” means the business of vehicle repairs, sales and an MOT testing garage business carried on by the Vendor at the Property under the name of Grenoside Service Station. “Business Name” means Grenoside Service Station. “Property” means land and buildings on the north east side of Penistone Road, Grenoside, Sheffield registered at HM Land Registry with Title Absolute under Title Numbers SYK111326 and SYK70082. “Fixed Assets” means the fixtures, fittings and equipment used in the Business particulars of which are set out in the First Schedule hereto. “the Excluded Assets” means all cash in hand or at the Bank of the Vendor, the Book Debts and the Liabilities.”[10]Clause 2 contained what was described as the Agreement of Sale in the following terms:
“2.1 Subject to the terms and conditions of this Agreement the Vendor shall sell to the Purchaser who shall purchase as at the Completion Date the Business as a going concern and all the Assets which comprise:- 2.1.1 the Property; 2.1.2 the Goodwill; and 2.1.3 the Fixed Assets but excluding the Excluded Assets. 2.2 The provisions of the Third Schedule hereto shall more particularly apply in relation to the sale of the Property.”
The Third Schedule contained provisions relating to the Property such as title guarantee, the relevant conditions of sale and other similar matters. 2.1.1 the Property; 2.1.2 the Goodwill; and 2.1.3 the Fixed Assets[11]Clause 3 provided for the purchase consideration in the following terms:
“3.1 The consideration for the Assets shall be the sum of £190,000.00 which shall be apportioned as follows:- 3.1.1 as to the Property £175,000.00; 3.1.2 as to the Goodwill £10,000.00; and 3.1.3 as to the Fixed Assets £5,000.00.”
Although clause 3.2 provided for a deposit of £19,000 to be paid on the date of the contract and the balance on completion as the contract was made and completed on the same day presumably the whole of the £190,000 was paid on 8th November 1999. 3.1.1 as to the Property £175,000.00; 3.1.2 as to the Goodwill £10,000.00; and 3.1.3 as to the Fixed Assets £5,000.00.”[12]The Partnership Deed exists only in an uncompleted draft form but bears all the signs of having been drafted at the same time as the Sale Contract. It is made between Mr Yafai defined as “Mageed” and Mr Muthana defined as “Mohamed”. They were together defined as ‘the Partners’. I will when quoting its terms substitute the names I use in this judgment for those used in the Partnership Deed. Clause 1 contains three recitals in the following form:
“1.1 By an Agreement dated 8th November 1999 (the Contract) and made between David Nicholson and James Anthony Stevenson (1) [Mr Yafai] (2) the Premises and the Business known as Grenoside Service Station situate at Penistone Road, Sheffield was purchased by [Mr Yafai] at a price of £175,000.00. 1.2 [Mr Yafai] has purchased the Business in his sole name with the benefit of a Legal Charge (the Mortgage) in favour of National Westminster Bank Plc dated the 8th November 1999 to secure the sum of £126,000.00 and interest costs and expenses as therein mentioned. 1.3 [Mr Muthana] has in fact contributed towards the purchase price of the Business and [Mr Yafai] HEREBY DECLARES that he holds the Business and any other Partnership Property acquired after the date of this Deed UPON TRUST for the Partners on the terms hereinafter contained.”
[13]Clause 2 provides that:
“In this Deed unless the context otherwise requires the following words and expressions shall have the following meanings:-”
The relevant definitions are:
“Senior Partner” means [Mr Yafai] or his successors in office as Senior Partner of the Partnership. “Business” means the Business of the Sales, Service, Repair and M.O.T. Testing of Motor Vehicles carried on by [Mr Yafai] under the style or title of Grenoside Service Station from the Property. “the Property” means Grenoside Service Station Penistone Road, Sheffield and registered at H M Land Registry under Title Numbers SYK111326 and SYK70082.”
The title numbers in the definition of “the Property” are the same as those used in the Sale Contract and are referable to Eden Park.[14]Clause 3 provides:
“3. COMMENCEMENT NAME AND BUSINESS 3.1 The Partners shall carry on the Business in Partnership at the Property or such other place as the Partners shall agree. 3.2 The Partnership shall commence on the 8th November 1999 and shall continue until it is terminated as provided in this Deed.”
[15]Clause 4 is headed Relationship of the Partners. It contains a number of more or less standard provisions but also the following:
“4.1 Each Partner shall be just and faithful to the other and [Mr Yafai] shall devote the whole of his time and attention to the Partnership Business diligently and faithfully work for the benefit of the Partnership. 4.2 [Mr Muthana] shall devote such of his time and attention to the Partnership Business as [Mr Yafai] considers reasonable and necessary. 4.6 [Mr Yafai] shall have the power to run the Business in accordance with the terms of this Deed but otherwise as he shall think fit.”
[16]Clauses 5 and 6 are critical. The former is entitled “Property” and provides: “5.1 The Property is owned by [Mr Yafai] and the Business should be carried on at the Property and such other property as the Partners shall from time to time agree. 5.2 [Mr Yafai] grants to the Partners and all persons duly authorised by them the right in common with himself to use the Property for the purpose of the Partnership upon terms that:5.2.1 The said rights shall continue until it is terminated by not than less one months notice in writing given by [Mr Yafai] to the other Partners or by the Partners to [Mr Yafai].5.2.2 As long as the said right continues the Partners shall pay for all heating, electricity, gas, water and other supplies to the Property as well as any Rates levied in respect of them and shall reimburse [Mr Yafai] in the full cost of the premiums which he undertakes to pay for the insurance of the structure of the Property to its full value.5.2.3 The Partners shall keep and maintain the Property in the same condition as they are now in fair wear and tear excepted.5.2.4 The Partners shall pay to [Mr Yafai] such sum as [Mr Yafai] is required to pay on the Mortgage. 5.3 The provisions of this Clause shall constitute a Licence only. Possession of the Property is retained by [Mr Yafai] subject to the rights granted by and to the other provisions of this clause and nothing in this clause is intended to confer any tenancy upon the Partnership. 5.4 [Mr Yafai] undertakes not to give notice terminating the Licence granted in this clause so long as the Partnership continues and she [sic] remains a Partner and the provisions of this clause are duly complied with. 5.5 For the purposes of clause 18 of this Deed notices given by or to the Partners in connection with the said Licence shall be sufficiently given if they are signed by [Mr Yafai] as Property Owner or by [Mr Muthana] on behalf of the Partnership and comply with the other requirements of that clause.” 5.2.1 The said rights shall continue until it is terminated by not than less one months notice in writing given by [Mr Yafai] to the other Partners or by the Partners to [Mr Yafai]. 5.2.2 As long as the said right continues the Partners shall pay for all heating, electricity, gas, water and other supplies to the Property as well as any Rates levied in respect of them and shall reimburse [Mr Yafai] in the full cost of the premiums which he undertakes to pay for the insurance of the structure of the Property to its full value. 5.2.3 The Partners shall keep and maintain the Property in the same condition as they are now in fair wear and tear excepted. 5.2.4 The Partners shall pay to [Mr Yafai] such sum as [Mr Yafai] is required to pay on the Mortgage.[17]Clause 6, entitled “Capital” provides:
“6.1 The Partnership Property consists of the assets purchased via the Contract and also any Stock previously owned by [Mr Yafai] and entered into the Partnership Books. The Partnership Property shall unless otherwise agreed in writing by all the Partners belong to the Partners in equal shares. 6.2 The Partnership Capital shall consist of:- 6.2.1 [Mr Yafai]’s Property and such further assets as may be acquired as Partnership Property. 6.2.2 Such items of money as the Partners shall from time to time contribute to the Partnership by way of capital (and not as advances). 6.2.3 Such freehold or leasehold premises as the Partnership may acquire with the consent of all the Partners.” 6.2.1 [Mr Yafai]’s Property and such further assets as may be acquired as Partnership Property. 6.2.2 Such items of money as the Partners shall from time to time contribute to the Partnership by way of capital (and not as advances). 6.2.3 Such freehold or leasehold premises as the Partnership may acquire with the consent of all the Partners.”
[18]Clause 7 deals with “Profits”. It provides:
“7.1 The profits shall be divided in such manner as the Senior Partner shall determine having regard to the contribution that he in his absolute discretion considers each of the Partners including himself shall have made to the earnings of those profits (or in the incurring of losses) and if the Senior Partner shall not have notified the other Partner in writing of his determination under this clause within thirty days after the draft Accounts have been received from the Accountants then the profits shall be divided in equal shares after deducting a first tranche or payment to the Senior Partner of £20,000.00 to compensate the Senior Partner for working full time in the Partnership Business.”
[19]Clauses 11, 12 and 13 contain provisions for termination, retirement and expulsion, any one of which may be a relevant event for the purpose of the option to purchase for which clause 14 provides. If the option is exercised by a continuing partner the share of the outgoing partner is to be valued, as provided in clause 14.3.1:
“The value of the Partnership Business shall be the value of the Partnership assets (which shall not include goodwill except to the extent that Goodwill is shown in the Balance Sheet of the Partnership) after deducting…”
The Partnership Deed concludes in paragraph 19 with a certificate that the transactions thereby effected did not form part of a larger transaction or of a series of transactions in respect of which the amount or value or the aggregate amount or value of the consideration exceeded £60,000.

Judgments of HH Judge Langan QC

[20]HH Judge Langan QC first considered the effect of the Partnership Deed in his judgment given on 27th January 2009 in relation to other issues. At that time he noted that:
“By Clause 5.1 “the Property is owned by [Mr Yafai] who, by subsequent provisions of the same clause, granted the partners a licence to use the Property for the purposes of the business. Notwithstanding what are said to be ambiguities arising from the other terms of the agreement, these provisions seem to me to settle the question of ownership in favour of Mr Yafai: this was, according to [the solicitor], the intention which underlay his drafting. That question is not, however, one which is before me for decision: and, should partnership accounts have to be taken, it remains open for argument by the parties.”
[21]Thus it was that in paragraph 26 of the Statement of Case on behalf of Mr Muthana served on 11th May 2010 he contended that on the true construction of the partnership deed Eden Park fell within the meaning of “[Mr Yafai]’s Property” for the purposes of clause 6.2.1 of the partnership deed or alternatively was a partnership asset owned jointly by Mr Muthana and Mr Yafai. This was denied in paragraph 28 of the statement of case served by Mr Yafai on 23rd June 2010.[22]In his judgment handed down on 10th June 2011 HH Judge Langan QC dealt with this issue in paragraphs 8 to 23. In the earlier paragraphs of that section he set out the facts surrounding the acquisition of the Grenoside Service Station and the relevant provisions of the Sale Contract and the Partnership Deed. After summarising the arguments of counsel he expressed his conclusion and reasons in paragraphs 18 to 22 in these terms:
“[18] … In the face of the elaborate provisions of clause 5, I can see that one natural conclusion to the debate is that the intention of the parties was to leave Eden Park in Mr Yafai’s beneficial ownership. The obligation to pay the mortgage instalments is little different from the obligation, which commonly arises between one partner and his colleagues, to pay rent or a licence fee for the use by the firm of premises owned by that partner. As [counsel for Mr Yafai] correctly says, there is no evidence before the court as to the rental value of Eden Park and thus no basis for supposing that the mortgage instalments amounted to more than would have passed as rent. [19] The question then comes to this. In the search for the intention of the parties, is greater violence done to the form and content of the agreement by downplaying the clause 5 scheme or by restricting the clause 6.1 reference to assets in the manner advanced by [counsel for Mr Yafai]? In my judgment, [counsel for Mr Muthana]’s submissions [to the effect that clause 5 related to the legal title and clause 6 to the beneficial interest] are to be preferred, because they have the effect of giving effect to every part of the agreement while not running contrary to the very plain words of clause 6.1. [20] Construction, however, is not purely a question of language. “The meaning which a document would convey to a reasonable man is not the same thing as the meaning of its words”: Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 at 913B (Lord Hoffmann). There are, to my mind, commercial considerations which, at the end of the day, tilt the balance in favour of Mr Muthana. [21] First, Eden Park was by far the most valuable asset being acquired at the start of the business, and the money contribution made by Mr Muthana was significantly greater than that made by Mr Yafai. [22] Second, the provision for division of profits combined with the obligation to pay the mortgage instalments out of partnership income could, if Eden Park did not become a partnership asset, produce a result which would be extraordinarily one-sided. As [counsel for Mr Muthana] pointed out, Mr Yafai could on [counsel for Mr Yafai]’s approach receive over the first five years his annual salary of £20,000, full repayment of the loan from National Westminster Bank, and (on Mr Yafai’s making annual determinations in his own favour) the whole of the profits of the business. The nil return to Mr Muthana would, in [counsel for Mr Muthana]’s words, “be perverse and lack business common sense.”
I agree. The reasonable businessman or businesswoman who, with knowledge of the relevant circumstances, took up this partnership agreement, and asked the question - “can they have meant that Eden Park would belong solely to Mr Yafai when the mortgage was paid off?” - would answer with a definite negative.”

The arguments of counsel and my conclusion

[23]The arguments in this court followed much the same course as they had evidently taken before HH Judge Langan QC. Counsel for Mr Yafai pointed out that clause 1.1 of the Partnership Deed distinguished between the Premises and the Business. The latter is clearly defined in clause 2 to exclude Eden Park so that the trust of the Business declared by clause 1.3 does not embrace Eden Park. He relied strongly on the provisions of clause 5 as wholly inconsistent with Eden Park being partnership property. He submitted that assets referred to in clause6.1 are the assets contracted to be bought by the Sale Contract excluding Eden Park and “[Mr Yafai]’s property referred to in clause6.2 is limited to the stock owned by him referred to in clause 6.1 with or without any additional stock used in connection with West Bar Motor Company.” He suggested that the terms of clause 6.2.3 are inconsistent with any concept of clause 5 being limited to the legal title in Eden Park.[24]Counsel for Mr Yafai also criticised the judge’s assessment of the commercial aspects of the partnership deed. He pointed out that, although it was true that Mr Muthana had provided £151,000, Mr Yafai’s contribution had been greater in that he had made himself liable to the bank for £126,000 secured additionally on other property of his, had put in £65,000 from his own resources and contributed stock valued at £26,000, in all some £217,000. Whilst, no doubt, Eden Park was the most valuable single asset there was also, no doubt, trading stock of considerable value. It appears that in the period ended 31st March 2001 the partnership had a turnover of over £2m and generated a profit of some £84,000. He accepted that clauses 5 and 7 of the Partnership Deed might be operated so as to repay the debt due to the bank and the net profit remaining to Mr Yafai but pointed out that this is the consequence of the unambiguous provisions of those clauses and had no impact on the construction of those parts of the Partnership Deed dealing with the ownership of Eden Park which might be thought to be ambiguous.[25]Counsel for Mr Muthana pointed out that the partnership commenced on the same day as the Sale Contract was concluded and completed. He relied on clause 1.2 as demonstrating that the word ‘Business’ in that context included Eden Park so that the declaration of trust in clause 1.3 embraced Eden Park too. He submitted that clause 6.1 plainly supports this interpretation as there can be no doubt but that Eden Park is an asset and was “purchased via the contract”. He noted that the valuation provision in clause 14.3.1 is to the like effect. Accordingly, so he submits, Eden Park was Partnership Property. He sought to minimise the relevance of clause 5 by suggesting, as the judge had accepted, that that clause is dealing only with the legal title in Eden Park. He relied before us, as he did in the court below, on what he submitted were the relevant commercial considerations and were accepted by HH Judge Langan QC. He accepted that such considerations cannot override the effect of clear words but should be given weight where there is an ambiguity.[26]Counsel for Mr Muthana relied on the recent decision of the Supreme Court in Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900. That case concerned the scope of a bank’s obligations under certain advance payment bonds issued as security for a shipbuilder’s obligation to refund to the buyer instalments of the purchase price of a ship being built for him. The relevant principle is clearly expressed by Lord Clarke of Stone-cum-Ebony in paragraph 21 in these terms:
“The language used by the parties will often have more than one potential meaning. I would accept the submission made on behalf of the appellants that the exercise of construction is essentially one unitary exercise in which the court must consider the language used and ascertain what a reasonable person, that is a person who has all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract, would have understood the parties to have meant. In doing so, the court must have regard to all the relevant surrounding circumstances. If there are two possible constructions, the court is entitled to prefer the construction which is consistent with business common sense and to reject the other.”
[27]But it is also necessary to note that in the preceding paragraph Lord Clarke had accepted the caveats noted by Lord Wilberforce and Lord Hoffmann in Prenn v Simmonds [1971] 1 WLR 1381, 1384-5 and Chartbrook Ltd v Persimmon Homes Ltd [2009] AC 1101 para 20:
“…where they discussed the reason for the rule excluding evidence of pre-contractual negotiations. In particular they stressed the irrelevance of the parties' subjective intentions and noted that the mere fact that a term in the contract appears to be particularly unfavourable to one party or the other is irrelevant. As Lord Hoffmann put it, the term may have been agreed in exchange for some concession made elsewhere in the transaction or it may simply have been a bad bargain.”
[28]I can express my conclusions relatively shortly. It is trite law that the Partnership Deed must be construed as a whole. Thus the definitions contained in clause 2.1 must be applied throughout the document unless a particular context otherwise requires. That clause clearly defines “the Business” in terms which exclude “the Property”. Whether or not “the Premises” mentioned in clause1.1 was a mistake for “the Property” proper effect can be given to both clauses1.2 and1.3 by applying the definition of “the Business” in accordance with its terms. I do not accept, therefore, the submission of counsel for Mr Muthana that the declaration of trust in paragraph 1.3 embraces both the Business and the Property as defined.[29]That construction is amply confirmed by the provisions in clause 5. Clause5.1 states in terms that the Property, that is Eden Park, is owned by Mr Yafai. There is nothing ambiguous about that nor is it in terms or context limited to the legal estate. If Eden Park was partnership property clause 5 as a whole would be unnecessary. I do not accept that it can be explained away as merely dealing with the legal estate. If the beneficial interest in Eden Park was property of the partnership clause5.2 would be redundant, clauses5.3 and 5.5 would be unnecessary and clause5.4 inconsistent. In any event if clause 6.2.3 embraces the legal title and beneficial interest in after-acquired freehold or leasehold properties why should the legal and beneficial interests in existing partnership property, as claimed, be split between clauses 5 and 6?[30]This leaves clause 6. This appears to be the first time the word ‘assets’ appears in the Partnership Agreement. That word is used later in, for example, clauses 10.1 and 14.3.1. It is capable of comprehending Eden Park which was purchased via the sale contract. That said, I can see no reason why the reference in clause 6.2.1 to “Mageed’s Property” should be treated as including Eden Park so as to constitute it not the property of Mr Yafai but the property of the partnership. Such a use would be contradictory; it would also be unnecessary if there is other property of Mr Yafai to which it might sensibly refer. The expression certainly covers the additional stock referred to in paragraph 6.1 and formerly used in connection with West Bar Motor Company. In the context of the Partnership Deed as a whole there is not, in my view, sufficient reason to extend the phrase to Eden Park too.[31]This leaves the commercial considerations to which the judge referred in paragraphs 21 and 22 of his second judgment. In relation to paragraph 21 it appears to me that the judge overlooked the fact that Mr Yafai contributed as much as, if not more than, Mr Muthana. The contribution of the latter was £151,000, that of the former £217,000. The object of the exercise was the acquisition of a viable business. That would require working capital and stock in trade. Nor can I accept fully the analysis of the judge set out in paragraph 22. Given that under clause 5.2.4 the sums due to the bank under the mortgage of Eden Park were to be paid to Mr Yafai such liability would cease after 5 years but the licence would continue, unless and until terminated thereafter, on terms only that outgoings and the cost of repair would fall on the partnership. In any event, as I have pointed out already, the nil return to Mr Muthana to which the judge referred was due to the effect of the express terms of clauses 5.2.4 and 7.1 which were applicable whether or not Eden Park was partnership property. For my part I am unable to see how the commercial considerations on which the judge relied were anything other than the consequences of the bargain Mr Muthana made. As such the observations of Lord Hoffmann referred to in paragraph 27 above are applicable.[32]For all these reasons, I consider that it is sufficiently clear from the terms of the Partnership Deed when read as a whole in accordance with the principles summarised by Lord Clarke of Stone-cum-Ebony and quoted in paragraph 26 above that Eden Park was acquired by Mr Yafai as his separate property and did not thereafter become an asset of the partnership. Even if that interpretation were susceptible to qualification in the light of commercial considerations those relied on by the judge were not, in my view, adequate for the purpose.[33]The parties have now agreed a minute of order to give effect to that conclusion and their agreement for the resolution of the remaining issues on this appeal. In my view such an order should now be made. Lord Justice Patten[34]I agree. Lord Justice Pitchford[35]I also agree.

Cited in 1 later judgment